Published on 7th June 2023
Productivity is under pressure. A lack of skills and competencies is hampering production, innovation and economic growth while tight labor markets are causing companies around the world to struggle with hiring and retaining talent. The Conference Board’s recent European Labor Market Outlook report concludes that this labor scarcity is here to stay. ManpowerGroup’s latest data concurs, showing shortages at a 17-year high with 77% of employers globally reporting difficulties in hiring.
In the past, the solution to boosting production was cutting costs while driving up the number of hours worked. Today, those strategies no longer work. The nature of work and employees’ motivations have changed. In the new normal, HR managers will need to guide companies toward taking a more human-centric approach to productivity.
When looking to improve labor productivity, HR leaders should start by focusing on learning and development strategies. There’s huge potential in training existing talent to carry out new roles and building a flexible workforce. Companies must abandon any ideas that skilling is costly or a waste of time. Much of it can be done on the job, and investment in people has been proven to drive productivity and support staff retention.
There’s also significant possibility in looking for and training the people furthest from the labor market. This includes early-school leavers taking their first step onto the employment ladder; the long-term unemployed who have found it challenging to get back to work; migrants looking to forge new careers; and the formerly incarcerated, for whom securing work can prove difficult. Connecting with the private employment services sector can help companies access these vulnerable populations. Those organizations are experienced in cooperating with public employment services and other workplace intermediaries to shine a light on overlooked talent and train them to do the jobs available.
For HR departments aiming to better leverage their existing workforce, they’d be well advised to consider policies that support part-time workers, employees who are also caretakers and employees reaching retirement age.
For instance, departments could develop services that help employees better reconcile their private and professional lives, such as concierge services, remote working and transportation between work and home. Introducing family-friendly policies such as childcare facilities, hybrid working and flexible working would allow working parents to better balance their responsibilities and be more productive. Such initiatives would also entice part-time workers and contractors to work more hours—as would extra benefits, such as days in lieu, training or healthcare, that kick in when people increase their working hours past a certain level. Establishing a temp-to-hire pipeline would be another way to tap further into the underused talent pool that is the contingent workforce and encourage people to consider a longer-term commitment with the company.
Aging populations present a particularly rich pool of untapped talent. We’re living longer and enjoying more active, healthy years, so there’s no reason for people aged 55 to 65 to fall out of—or get pushed out of—the workforce. Companies need strategies that persuade this demographic to delay retirement by a few years and explore different working options through “rewirement.” This allows older workers to remain in the workforce for longer and bring their experience and expertise to help support upcoming generations.
Covid took a severe toll on workers’ mental health, which ultimately had a negative impact on productivity. A record number of people are feeling burned out or just plain worn out. According to Microsoft’s 2021 Work Trend Index report, 39% of employees feel exhausted and 54% feel overworked. They’re also less engaged. A recent Gallup poll found 60% of respondents are emotionally detached from work, and almost 20% are actively disengaged!
Recent years have witnessed the phenomenon of quiet quitting, as well as mass resignations (with some people leaving the labor market altogether). Despite the workforce getting back to pre-Covid numbers, the fall in working hours experienced during the pandemic still hasn’t recovered. Of course, the writing had already been on the wall, driven by a rise in individualism—particularly among younger generations—and a desire to achieve a better work/life balance. The pandemic merely served to accelerate the trend by giving workers a taste of more autonomy in their working lives. This has fueled the Great Mismatch: the growing gap between worker expectations and reality. In fact, Microsoft’s Work Trend Index found 54% of managers feel leadership is out of touch with employees’ desire for freedom of choice and purpose in their work.
HR departments need to help companies develop policies that focus on the well-being of workers and build back the satisfaction that they gain from work. If companies are serious about enhancing productivity and attracting and retaining the best talents, they need to take a more tailored approach. By placing themselves in the workers’ shoes, employers can better evaluate the value proposition they offer for different demographics. Gone are the days when people adapted their lives to meet the demands of work. In the new reality, work is going to have to adapt to life—every individual life.
Delivering in this new world of work will require well-functioning labor markets that provide a range of employment contracts and a choice as to where, when and how people work. But greater labor market flexibility will only work if it’s supported by proper regulation and policies. People aren’t going to stay on or work more hours if they end up losing their pension rights and other social security benefits.
With fewer options to increase supply, HR professionals will need to think outside the box. By harnessing the potential of people-focused policies and adopting a more nuanced approach to securing workforce needs, there’s ample scope to solve the productivity challenge.
First published by Forbes, June 2023